Severance of Joint Tenancy(to tenants in common)

What is Joint Tenancy?
A joint tenancy is a form of ownership by two or more individuals together. This form of ownership decrees that property will automatically pass to the survivor/s regardless of any instructions in their Will.

What is Tenants in Common?
A tenancy in common is another form of co-ownership the difference is that upon the death of one co-owner, his or her interest does not automatically pass to the surviving owner, but passes according to their Will.

As a ‘tenant in common’ you have the choice of who inherits your half of your property, according to your Will, therefore safeguarding your children’s inheritance if your spouse re-marries or co-habits after your death.
But what if the surviving Partner has to sell the property to settle the entitlement to the beneficiary?
A simple solution to this is to give the survivor a ‘life interest’ in the property – this will enable them to reside in the house, for as long as they live.

The family home may be your main legacy to your children, tenants in common can help protect your property from future unforeseen situations, for example, long term care.

You can reduce an Inheritance Tax liability by utilising both the Inheritance Tax nil-rates available to you – this is currently set at £325,000.

For example if your property was worth £650,000. And you had a joint tenancy you could have to pay 40% Inheritance Tax on £325,000.

However, if you held the property as tenants in common, through taking advantage of both the nil-rates available there would be no Inheritance Tax to pay, since when the surviving spouse or partner dies a further nil-rate band would be available.

This would create a saving of £140,000. That would have otherwise gone to HM Revenue & Customs.

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